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Widow of 9/11 Victim Is Not a Terrorist Victim

By Alistair M. Nevius, J.D.

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A
federal court has ruled, in a case of first impression, that
a widow who committed suicide after her husband was killed
in the 2001 World Trade Center attack does not qualify as a
victim of terrorism and therefore her estate does not
qualify for the reduced estate tax rates under Sec. 2201(c)
(Estate of Kalahasthi, No. CV 07-05771 MMM (RCx)
(C.D. Cal. 7/7/08)).

Pendyala Vamsikrishna was a
passenger on American Airlines flight 11 when it was
hijacked and crashed into the north tower of the World Trade
Center on September 11, 2001. He was killed in the crash. On
October 19, 2001, his grieving widow, Prasanna Kalahasthi,
committed suicide, leaving two notes and an audio recording
indicating that she could not live without her husband.

After the September 11 terrorist attacks, Congress
enacted the Victims of Terrorism Tax Relief Act of 2001,
P.L. 107-143, to afford some tax relief to the victims of
the attacks. Included in this relief was a set of reduced
estate tax rates that apply to the estates of qualified
decedents (Sec. 2201(c)). Qualified decedents include
decedents who die "as a result of wounds or injury
incurred as a result of" the September 11 terrorist
attacks (Sec. 692(d)(4)).

Until this case, no court
had addressed the meaning of "as a result of" or
"wounds or injury incurred" as used in this
definition. Her estate argued that Kalahasthi need not have
been present at the site of the attacks to be a victim of
the attacks and that she died as a result of the attacks.
The government, on the other hand, argued that the plain
language of the statute excluded Kalahasthi because she was
not "wounded" or "injured" in the
attacks and she did not commit suicide "as a result
of" the attacks.

The court held that nothing in
the Victims of Terrorism Tax Relief Act required the victim
to have been physically present at the scene of the attacks,
so the fact that Kalahasthi was not physically present did
not automatically preclude her from being a victim of the
attacks. The question that faced the court was: How
attenuated can the causal connection be between the
terrorist attack and the decedent's death and still fall
within the "as a result of" language of Sec.
692(d)(4)?

There was no dispute that Kalahasthi's
death was caused by emotional suffering arising out of the
September 11 terrorist attacks. The court examined whether
emotional suffering constitutes a "wound" or
"injury" for purposes of Sec. 692(d)(4). While the
statute is not unambiguous, the court held that
"injury" in this context means "physical
injury." The court went on to hold that Kalahasthi's
suicide was an intervening cause and that therefore she did
not die "as a result of" the terrorist attacks.

Because the decedent did not suffer a physical injury
in the attacks and did not die as a result of the attacks,
the court held that her estate was ineligible for the
reduced estate tax rates.

The winners of The Tax Adviser’s 2016 Best Article Award are Edward Schnee, CPA, Ph.D., and W. Eugene Seago, J.D., Ph.D., for their article, “Taxation of Worthless and Abandoned Partnership Interests.”

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